Monday, December 13, 2010

Why Not Double Imports or Just Total International Trade Over the Next Five Years to Create Jobs?

Huffington Post -- "Buoyed by strong demand from China and India, the U.S. trade deficit dropped to its lowest level in 9 months, as exports rose to their highest level in two years. These numbers should please the Obama Administration, who've set out to double exports over the next five years to combat high unemployment rates and encourage domestic manufacturers. Analysis by the Economics and Statistics Administration indicate that exports will this year support close to 9.4 million jobs, an increase from a 2009 estimate that put the number at 8.5 million."

MP: Isn't there an underlying mercantilist, fixed-pie assumption here that exports create jobs, and imports destroy jobs? As the chart above shows, more than half of U.S. imports are inputs (industrial supplies, raw materials and capital goods) that were purchased this year by U.S. firms and will become part of some production process in the U.S. that will help support or create jobs in the U.S. Why shouldn't we have a goal to double imports over the next five years, or simply to double international trade in general over the next five years (see post below)?

9 Comments:

Becoming the world's factory, where half of output is exported, requires massive investment.

Special Report: The Chinese consumer awakens Dec 9, 2010

"Spending might be sturdy in China, but investment has been off the charts. As a result, consumption was just 35.6 percent of Gross Domestic Product in 2009, from 46.1 percent a decade earlier - and that was helped by a massive government stimulus to counter the global financial crisis.

Still, he doubted China's consumption share would reach the roughly 60 percent rate of the European Union, let alone the 70 percent rate of the United States."

Y = C + I + G + NX

C down, while I, G, and NX way up, or C increased at a much slower rate.

The goal has been to increase G at the expense of C, or government growth at the expense of (private) consumption growth.

When a trade deficit occurs, there is a always a question of how it is to be paid for. When a trade surplus occurs, the nation with the surplus tends not to have that concern. Plus, export-led growth has worked for all of the other economic "success stories", and so we think it must work for us too.

more than half of U.S. imports are inputs (industrial supplies, raw materials and capital goods) that were purchased this year by U.S. firms and will become part of some production process in the U.S. that will help support or create jobs in the U.S.

I don’t get this. We lay off those American workers making auto carburetion components and import them instead of making them. Those imports are inputs that are part of the production process that helps support jobs in the U.S.????

I just do not see how this can be. I am filing this beside the “outsourcing creates American jobs” and the 17 percent u6 which occurs with more “job producing” free trade than we have ever had before and the lowest tariffs we have ever had.

A question: One data point that I don't usually see included in the "import vs. export (or self-manufacture) debate" are the positive externalities of manufacturing. I specifically have in mind the innovation (propelled by an incentive towards efficiency) that can come from being intimately involved in the manufacturing process (which itself is a product of the valuable increased intellectual capital that individuals acquire)?